Question

1. When the whole sector of the market is occupied by the little number of big corporations who share the leadership, what do we call this type of market structure? Explain ….in details the benefit of this market for the leading company and the disadvange of such situation on final consumers (300-500 words)

Answer 1

ANSWER - The market structure will be oligopoly because the firms are coming together to share the leadership and will agree upon the decided price and the quantity of the good to be produced for the market. Mainly the benefits from these market are reaped by the sellers . The benefits are as follows -

1 - The firms may bring upon the new technology which might increase the efficiency of the production.

2 - The firms earn huge amount of profits because of the lack of competitive behavior.

3 - They can cater the needs of the population in a better way by producing the goods which the public needs the most.

4 - New techniques for persuading the consumer come up.

5 - There is also the competition called the cut throat competition which prevails in this market. Because of this competition there always remains a type of battle among the buyers that who will sell more due to which they may also lower the price of the product to sell m ore hence the consumers are benefited sometimes due to this cut throat competition because they get the product at the comparatively lower prices.

An example of this type of market can be the Automobile market in which the sellers have almost the same prices and the number of vehicles in the market are also in a limited quantity. The manufacturers are few which rule the market like leader.

The disadvantage to the consumer is that due to the limited sellers in the market who actually run the whole market , they have lesser choices for the product and cant decide upon properly what to buy.

The prices are almost fixed by all the sellers because of the mutual cooperation between the sellers hence the consumers have to pay the fixed amount and lose the right of bargain and have to pay higher prices than what they expected.

Now another disadvantage is than there are some big firms which rule the automobile market like the FORD. Due to this the small sellers which want to establish themselves in the market get discouraged because they cannot raise there prices to earn more profits or they will be thrown from the market. They also cannot lower the price because the price has been fixed by the large sellers who dominate the market , hence the small sellers fail to survive in this type of market.